The Industries of the Future
By Alec Ross
This book is about the next economy. It is written for everyone who wants to know how the next wave of innovation and globalization will affect our countries, our societies, and ourselves.
This book explores the industries that will drive the next 20 years of change to our economies and societies. Its chapters are built around key industries of the future—robotics, advanced life sciences, the code-ification of money, cybersecurity, and big data—as well as the geopolitical, cultural, and generational contexts out of which they are emerging.
Fully integrating and empowering women economically and politically is the most important step that a country or company can take to strengthen its legacies regarding the treatment of women will founder in the next wave of innovation.
Jobs in the service sector that were largely immune from job loss during the last stage of globalization are now at risk because advances in robotics have accelerated in recent years, due to breakthroughs in the field itself as well as new advancements in information management, computing, and high-end engineering.
Most corporate research and development in robotics comes from within big companies (like Google, Toyota, and Honda), but venture capital funding in robotics is growing at a steep rate.
The appeal for investors is obvious: the market for consumer robots could hit $390 billion by 2017, and industrial robots should hit $40 billion in 2020.
Innovation in robotics will produce advances in degree—robots doing things faster, safer, or less expensively than humans—and also in kind: they’ll be doing things that would be impossible for humans to do.
More than 1 million Americans have already undergone robotic surgery.
The next generation of robots will be mass-produced at declining costs that will make them increasingly competitive with even the lowest-wage workers. They will dramatically affect employment patterns as well as broader economic, political, and social trends.
Overall, robots can be a boon, freeing up humans to do more productive things—but only so long as humans create the systems to adapt their workforces, economies, and societies to the inevitable disruption. The dangers to societies that don't handle these transitions right are clear.
The biggest wins from new technology will go to the societies and firms that can adapt and direct their citizens toward industries that are growing. Robotics is one of them, and the others are the very focus of this book.
That means taking some of the billions of dollars of wealth that will be produced from the field of robotics and reinvesting it in education and skills development for the displaced taxi drivers and waitresses.
We aren't as easy to upgrade as software.
The last trillion-dollar industry was built on a code of 1s and 0s. The next will be built on our own genetic code.
Over the past half century, we’ve witnessed unparalleled advances in the life sciences. Artificial hearts, new wonder drugs, organ transplants, and other developments allow people to live longer, healthier lives.
The size of the genomics market was estimated at a little more than $11 billion in 2013 and is going to grow faster than anyone could imagine.
Developing drugs targeted to the genetics of an individual is as unsubtle a change in the practice of medicine as the introduction of anesthesia in the 19th century. It will make today’s most cutting-edge treatments look absolutely primitive by comparison.
The process, called xenotransplantation, involves modifying a pig genome so that a pig embryo can grow up with organs that can be harvested and transplanted into humans. The initial focus is on lungs, but hearts, kidneys, and livers could also be possible.
A few years back, a team of scientists used the DNA of a dead bucardo, a wild goat indigenous to the Pyrenees Mountains that went extinct in 2000, to create bucardo embryos.That’s right: a regular goat gave birth to a once-extinct bucardo goat in 2003. It managed to survive for only several minutes after its birth.
Efforts are already under way to “deextinct” the carrier pigeon, the health hen, and an Australian frog most notable for giving birth through its mouth.
In the same way in which human behavior has changed the earth’s climate, advances in genomics could alter the world’s ecology.
Where we are today with genomics is the equivalent of where we were in 1994 at the advent of the commercial Internet. Genomics is going to have a bigger impact on our health than any single innovation of the 20th century.
Genomics will become a trilliondollar industry, extending lives and nearly eliminating diseases that kill hundreds of thousands of people a year today.
***
If eBay and PayPal represent the original American manifestations of that trend, what comes next will be far more global.
Today digital banking has become nearly universal in developed economies, as has mobile banking, with the ubiquity of cell phones.
For these customers, the mobile phone is eliminating the need for ATMs just as ATMs eliminated the need for bank tellers.
And while our genomes are being decoded over the next 20 years, our money will be coded—broken down into 1s and 0s and wrapped within powerful tools for encryption.
The code-ification of money, markets, payments, and trust is the next big inflection point in the history of financial services.
Innovations like eBay and PayPal have had a significant impact in creating the first wave of coded markets. Despite PayPal’s desire to be a global payment system, there are many countries where service is limited or nonexistent.
If eBay and PayPal represent the original American manifestations of that trend, what comes next will be far more global.
Coded markets will now reach into the world’s most isolated communities, and they will link emerging markets to the global economy even more closely.
When it comes to coded trust, eBay offered the first major breakthrough. eBay was created in 1995, shortly after the birth of the commercial Internet, to be an online marketplace based on trust. It is a peer-to-peer network where buyers and sellers engage in commerce directly, exchanging money for goods between themselves.
The next leap forward in the code-ification of trust and markets is in the so-called sharing economy. I think of the sharing economy as a way of making a market out of anything and a microentrepreneur out of anybody.
To the extent that there is an underlying ideology, it is not about sharing or creating community around the breakfast table; it is the economic theory of neoliberalism, encouraging the free flow of goods and services in a market without government regulation.
It was basically an online garage sale. Today you can buy any make or model of Ferrari, the most precious item you might find in anyone’s garage.
I foresee it growing to allow workforces to be built almost entirely out of peer-to-peer marketplaces where everyone from top engineers to the janitor sells their services online, wiping out headhunters and temp agencies.
Bitcoin at its best could make fraud impossible unless one’s private key is stolen and make the thieves easy to find even if a key is stolen. The result could be a major drop in fraud. Furthermore, by codifying trust for high-value transactions, the blockchain could wipe out middlemen and friction in a variety of transactions, creating consumer surplus.
Only about twenty countries around the world have what we would consider to be fully modern banking and payment systems; the other roughly 175 have a long way to go.
Bitcoin, as a global payment system anyone can use from anywhere at any time, can be a powerful catalyst to extend the benefits of the modern economic system to virtually everyone on the planet.
In April 2015, Goldman Sachs and Chinese investment firm IDG invested $50 million in a Bitcoin company, specifically because they liked the technical innovation that made it easy to move money around the globe.
My hunch is that The Blockchain will be to banking, law and accountancy as The Internet was to media, commerce and advertising. It will lower costs, disintermediate many layers of business and reduce friction.
This is yet another example of how digital networks and digital trust can do away with traditional middlemen as arbiters and authorities.
As blockchain technology takes off, its impact will be like that of the sharing economy and other forces of digital disintermediation: it will force a rewrite of the compact between corporation, citizen, and government. It is bringing frontier economies onto the global playing field while destroying middlemen and traditional authorities.
***
Over the 20 years from 2000 to 2020, the cybersecurity market will have grown from a $3.5 billion market employing a few thousand people working in IT departments to a $175 billion market providing critical infrastructure to just about every kind of business, big and small.
The weaponization of code is the most significant development in warfare since the development of nuclear weapons, and its rapid rise has created a domain of conflict with no widely accepted norms or rules.
Any country, or even any rogue group or individual, that puts a little bit of time and effort into it can develop some nasty offensive cyber capabilities.
To create a cyberweapon, all one needs are a computer, an Internet connection, and some coding skills. The development of cyberweapons is incredibly difficult to trace.
One of the most notable cyberattacks that took place (and went public) during my time at the State Department was a Chinese government operation that targeted 34 American companies including Google and some of America’s biggest defense companies.
I wonder what would have happened if, when Google had identified the source of the hack, it had responded in kind with an attack designed to disable its attacker’s network and computers. Would China have considered this an attack or some other form of invasion?
If international norms and treaties are not agreed to, setting definitions and boundaries for cyberconflict, a cyberwar is just as likely to be fought between a country and a company as it is between two countries.
Throughout summer and * fall 2014, the Obama administration monitored a hack of JPMorgan Chase and other American banking institutions as a national security threat that required the direct engagement of the president of the United States.
The question being asked inside the White House Situation Room today is whether government should treat a cyberattack draining bank accounts of an American bank on American territory as an attack against the American nation, as a robbery, or as something else entirely.
The growth of cybersecurity into a large industry is the inevitable result of the weaponization of code.
With the evolution of more of our life into zeros and ones and the rise of the Internet of Things, cybersecurity needs to be accounted for as a central feature in all the products being developed and commercialized for tomorrow.
However the growth of the cybersecurity industry takes shape, one point that I have never heard anyone even try to rebut is that the industry is going to get very big very fast.
We all want the liberty that comes with a vibrant online life, but liberty without security is fragile, and security without liberty is oppressive. The years ahead will force us to balance these two as we have not had to before.
***
Land was the raw material of the agricultural age. Iron was the raw material of the industrial age. Data is the raw material of the information age. *
Wall Street has taken advantage of big data as much as any industry. Of the roughly 7 billion shares that are traded in US equity markets every day, two-thirds are traded by preprogrammed computer algorithms.
The next impact of big data in the finance world will be in retail banking.
The application of big data to enhance operations and product development in retail banking is known as “fintech.”
In 2008, financial technology firms raised approximately $930 million in investments globally. In 2013, these firms collectively raised about $3 billion and that amount is expected to reach $8 billion by 2018.
A bank is a giant ledger that records how much money belongs to people and how much money people owe them. At heart, that’s a data problem.
Banks and hospitals are the only places in the world where you walk into them and you don't know what they sell. There is no list of products. There is no list of prices.
What banks do—storing value, moving value, and pricing risk—those are all the functions of a data company. Google could, if they wanted to, do those three things better than most banks.
***
Many of us are learning the hard way that once data is produced, it rarely fades away.
Parents are going to have to talk to their kids about data permanence, online privacy, and security years before they have the first conversation about sex and the birds and the bees because it will actually be relevant years before. *
The dangers out there aren't always obvious, which makes data permanence all the more tricky to navigate.
It is not just your past emails or love life that can come back to haunt you. It can also be the math class you failed, the fight you got into in school, or your inability to make friends as a toddler.
The rise of big data has reawakened the world to privacy as a public-policy issue. It is difficult to bring big data technologies and the value of privacy into alignment.
Less discussed, but an even bigger problem for people who are not targets of terrorism or law enforcement investigations, are cell phone cameras and wearable technologies capturing what we do and say “from below”—sousveillance.
Whether or not we may want to respect a stronger version of privacy, it’s possible that we’re now unable to turn back and actually reach that notion of privacy.
With the proliferation of sensors, devices, and networks sucking up data everywhere, we may be past the point of being able to halt data collection in any meaningful way.
In a world without privacy, everybody will have a scandal.
Who owns the data is as important a question as who owned the land during the agricultural age and who owned the factory during the industrial age. Data is the raw material of the information age.
Big data is, by its nature, soulless and uncreative. It nudges us this way and that for reasons we are not meant to understand. It strips us of our privacy and puts our mistakes, secrets, and scandals on public display.
Big data simultaneously helps solve global challenges while creating an entirely new set of challenges.
The choices we make about how we manage data will be as important as the decisions about managing land during the agricultural age and managing industry during the industrial age. We have a short window of time—just a few years, I think—before a set of norms set in that will be nearly impossible to reverse.
***
With the industries of the future, new avenues of opportunity for countries and people alike will hinge on domain expertise—deep knowledge about a single industry, which tends to concentrate in specific cities or regions.
My view is that the geographic spread of domain expertise in the industries of the future will ensure that the next stage of globalization produces centers of innovation and commercialization that are more geographically diverse than the last stage, when Silicon Valley enjoyed 20 years of domination.
In the famous words of H. G. Wells, “Adapt or perish.” *
Estonia has demonstrated how innovation in the industries of the future can do more than just generate wealth and employment; it can enhance our civic and political life. In this respect we should stop asking about the next Silicon Valley and start asking about the next Estonia.
The principal political binary of the last half of the 20th century was communism versus capitalism. In the 21st century, it is open versus closed.
But to the extent that political systems are somewhat deterministic, countries that choose more open systems and can maintain them will be the places where the industries and businesses of the future are founded, funded, and come to market.
The future of the global economy depends hugely on what happens in China and India, but countries around the world are facing the same predicaments. Some are adapting in brilliant, innovative ways, while others are languishing or failing to realize the shifting winds of the global economy.
Going forward, a crucial factor in countries’ success will be their ability to empower their own citizens—and this means all of their citizens. Too often countries still focus on only half—their male population—and ignore or abuse women, even as they hold so much potential.
The progress of women in Chinese society over the course of decades is one of the major reasons it is the economic power it is today.
A second major condition necessary for societies to compete and succeed in the industries of the future is to have young people whose ideas are funded and whose place on organizational charts belies their youth.
At age 43, I am frequently the oldest person in any business meeting in Silicon Valley. In Europe, I am frequently the youngest. *
It is not a coincidence that Google, Facebook, Microsoft, Oracle, and countless other information-age companies were started by people in their twenties—and started in the United States.
Venture capitalists in Silicon Valley won't hesitate to invest in twentysomethings.
China’s biggest social media company was started by a graduate student in his 20s. Its largest e-commerce company was started by someone in his 30s.
When leaders wonder what they can do to position their societies for the industries of the future, they need to open up and resist control-freak tendencies. The 21st century is a terrible time to be a control freak; future growth depends on empowering people.
If big data, genomics, cyber, and robotics are among the high-growth industries of the future, then the people who will make their livings in those industries need to be fluent in the coding languages behind them.
***
The innovation and company creation that is just now beginning to take place in robotics, genomics, cyber, big data, and new fields made possible by the code-ification of money, markets, and trust will spring from alpha cities around the world, but they will also come from places that most business leaders have never visited, like Estonia.
I expect most of the billion-dollar businesses in cyber and big data to spring from the minds of people in their twenties and thirties—those who grew up programming in a time of code war and the exponential growth of data.
The obligation of those in positions of power and privilege is to shape our policies to extend the opportunities that will come with the industries of the future to as many people as possible.
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